Summer 2007 / No. 72
Critical Illness—what’s taking so long?
Many in the industry agree—critical illness insurance is a better value for the consumer than traditional cancer insurance. But, new cancer sales in 2006 were over double the critical illness sales (about $450 million versus just under $160 million), and the annual growth rate for the cancer line was almost 25 percent while critical illness sales declined by four percent. So, if it’s true that CI is a better value, why then do cancer sales continue to grow and critical illness sales just limp along?
We believe the answer is largely the producer. Many producers that have sold cancer insurance for years continue to be more comfortable with that product. They believe that the gaps left in covering the cost of combating cancer are best filled by the traditional cancer plans. Some quotes from producer interviews illustrate this:
“As cancer treatments evolve and become more beneficial to cancer patients, cancer plans will continue to offer support in a person’s time of need.”
“I think that the available money that employees have to spend will keep going down as they are required to pay more and more for their major med coverage. This puts more pressure on voluntary benefits. I think cancer insurance is a coverage that most people can easily identify with and will continue to appeal to employees.”
“As we see more transfer of benefit costs to employees, cancer will continue to be the leader as it is requested by more employees.”
Many producers also say they are unlikely to sell both cancer and critical illness in the same account. Instead, they often stay with cancer when it has already been introduced in an account. Because cancer has been in the market much longer than CI, that’s a huge number of accounts! And while some carriers offer CI without a cancer benefit (just for these situations), producers may still not introduce the CI product.
Further evidence that the selection of cancer vs. critical illness is producer driven can be seen when we look at the sales without Aflac’s numbers. Interestingly, the differential between the market share of cancer versus critical illness is much less. Cancer sales were only 25 percent higher than CI sales in 2006 without Aflac’s numbers and compared to the same base in 2005, both lines had double-digit sales increases.
All of this is not to say that cancer insurance should not be sold. The product has been around for years, and one only has to look at the letters that carriers have from cancer claimants or their families to know that the product pays out. But as newer producers (especially the Benefit Brokers) in the voluntary market who are more comfortable with critical illness sell a greater share of the market’s volume, we expect that CI sales will increase and gradually gain more of a market share.
Eastbridge has just published an updated spotlight report on voluntary critical illness products. For more information on Worksite Critical Illness Products—2007, call us or email info@eastbridge.com.
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